Get pricing right to come out of woes: Parekh to realtors

New Delhi: Coming hard on property developers, top mortgage lender HDFC’s Chairman Deepak Parekh has said they are unrelenting on pricing despite a growing inventory of unsold housing units.

The eminent banker also asked the developers to shift their focus away from high-end luxury housing and said the “real demand is in the affordable housing segment”.

Parekh, known for his frank views, said many construction companies were hamstrung with over-leveraged balance sheets, while he also flagged delays in completion of projects because of developers trying to “deviate from standard building norms by paying to flout rules”.

“Such malpractices are hazardous for all,” Parekh said, while adding that the developers must ensure strict adherence to ethical building codes and standards.

“A regime that shuns ‘speed money’ and focuses only on ‘speed’ would go a long way in improving affordability in the housing sector,” the HDFC Chairman said in his annual letter to the shareholders.

Realtors’ apex body CREDAI’s National President Getamber Anand, however, rejected the criticism that pricing was unrealistic and developers were focussed on luxury projects.

“High-end housing is very small in volume and is being done only in some metros like Mumbai. In the rest of the country, price points are very realistic in the range of Rs 3500-5,500 per sq ft.

“There is no room for lowering this price range because input costs have gone up and there is also cost of interest. Moreover, there has been a slowdown in the economy in the last two years,” Anand said.

According to real estate research firm PropEquity, about 7.6 lakh housing units are unsold in 14 major cities, out of which Mumbai Metropolitan Region, NCR and Bengaluru together account for more than two-thirds.

Anand also said the unsold inventory was estimated at 6-7 lakh housing units across the country.

Asked about funding for land buying, Anand said the banks should give loan to genuine developers who will build homes on that land and such funding should not be to finance the speculators in the market.

Parekh, on the other hand, made a strong pitch for banks and housing finance companies to be allowed to fund the land transactions, at least for residential purposes.

The RBI had prohibited banks and HFCs from funding land transactions in 2006 on fears of asset price bubbles.

As the fears of any speculative bubble have abated, the regulators now need to relax this restriction, Parekh said.

He also sought immediate steps to fast-track numerous approvals required for such projects.

“For the construction sector to revive, there is also an urgent need to reduce delays in claims settlement. Ironically, a majority of these claims are with government bodies,” he said.